Brunswick Corporation continued to focus on stabilizing the operating performance of its fitness segment, which it wants to divest. It is also developing new initiatives in the digital space that are receiving growing acceptance, such as its recently announced technology-enhanced partnerships with Apple, Retro Fitness and Orangetheory Fitness.
Mentioning steady market conditions in the sector, the parent company of Life Fitness, Cybex, Hammer Strength, Scifit and Indoor Cycling reported a slight increase of one percent to $252.2 million for its fitness division. Sales outside the U.S. went up nominally, representing 48 percent of total segment revenues, but sales in Europe rose in dollar terms to $45.9 million from $43.6 million.
Brunswick reported strong commercial sales to health clubs in the U.S., but they were mostly offset by declines in cardio products, led by continued weakness at Cybex.
The division's quarterly gross margin began to stabilize on a sequential basis. However, the operating margin declined to 5.7 percent from 7.4 percent in the same quarter a year ago due to higher freight costs, cost inflation, inefficiencies and an unfavorable product mix, combined with extra costs of $1.6 million related to restructuring, a product field campaign, impairment charges and exit and integration costs.
Brunswick's total consolidated sales went up by 6.3 percent on an adjusted basis in the quarter, reaching a level of $1,400.9 million, with a 7.7 percent increase for its strong marine business, which the group intends to keep.
Operating earnings declined by 3 percent, resulting in a decline in the group's operating margin to 12.7 percent from 13.9 percent in the year-ago period, despite a 2 percent increase in the marine operations. Net earnings fell by 34 percent to $79.0 million, notwithstanding a drop in the tax rate to 19.4 percent from 28.3 percent.
